© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 1

Consultation on introduction of ICE Swap Rate based on SONIA January 16, 2020

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 2

Contents

Executive summary 3

About ICE Swap Rate 4

ISR GBP SONIA rates 6

Disclaimers 9

Consultation questionnaire 10

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 3

Executive summary

ICE Swap Rate (ISR) is recognised as the principal global benchmark for swap rates and spreads for EUR, GBP and

USD interest rate swaps. It represents the mid-price for interest rate swaps (the fixed leg), at particular times of the

day in tenors ranging from 1 year to 30 years. The floating leg is EURIBOR® for EUR and ICE LIBOR (LIBOR) for

USD and GBP.

In August 2019, ICE Benchmark Administration Limited (IBA) published a Feedback Request paper posing two key

questions. The first question was whether IBA should expand the data set to help increase the publication numbers.

IBA published a further consultation on this in December 2019.

The second key question was whether IBA should publish ISR GBP SONIA rates based upon growing volumes in

SONIA Swaps. All of the SONIA-related responses were in favour of IBA constructing and publishing GBP rates

based on SONIA alongside the existing LIBOR-based benchmark. IBA now seeks comments on specific aspects of

this implementation.

A questionnaire is attached for completion. More general feedback by email or letter is also welcome.

Respondents are requested to provide feedback to IBA at IBA@theice.com by 5pm London time on Friday May

22, 2020.

After the feedback period has closed, IBA will publish a feedback statement summarising responses. IBA will also

publish the comments received unless confidentiality has been requested by the originator of the comments.

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 4

About ICE Swap Rate

Introduction and Background ICE Swap Rate (ISR) is recognised as the principal global benchmark for swap rates and spreads for interest rate

swaps. It represents the mid-price for interest rate swaps and spreads (the fixed leg), at particular times of the day

in three major currencies (EUR, GBP and USD) and in tenors ranging from 1 year to 30 years. The floating leg is 3M

ICE LIBOR (LIBOR) for USD, 3M and 6M LIBOR for GBP, and 3M and 6M EURIBOR® for EUR.

ISR is used as the exercise value for cash-settled swaptions, for close-out payments on early terminations of interest

rate swaps, for some floating rate bonds and for valuing portfolios of interest rate swaps.

It was the first global benchmark to transition from a submission-based rate, when ICE Benchmark Administration

(IBA) changed the methodology in 2015 from panel banks’ inputs to a new patented methodology based on tradable

quotes sourced from regulated electronic trading venues. Such venues are Multilateral Trading Facilities (MTFs) and

Swap Execution Facilities (SEFs).

ISR Methodology The methodology is based on finding the volume-weighted average mid-price (VWAMP) from theoretically filling a

trade in Standard Market Size (SMS) on both the bid and offer side at the relevant time.

The steps to produce ISR are that:

1. IBA receives data from multiple complete central limit order books (CLOBs), comprising tradable bids and

offers, from regulated trading platforms during a pre-defined calculation window. The regulated trading

platforms are BGC Partners’ BGC Trader, Tradition’s Trad-X and ICAP’s i-Swap.

2. IBA takes a set number of ‘snapshots’ from this data at randomised intervals to make the benchmark robust

against momentary aberrations in the market.

3. The data is combined for each snapshot into a synthetic order book that represents the best prices and

accompanying volumes available in the market at that time.

4. IBA calculates the volume weighted prices at which a trade in SMS could be filled from this synthetic order

book on both the bid and offer side. These prices are used to calculate the VWAMP.

5. IBA performs a number of checks on the input data to exclude illiquid and outlier snapshots together with

snapshots with crossed and zero bid-offer spread order books:

Illiquid snapshots

Illiquid snapshots are not included in the calculation. To ensure this, any snapshots that do not fill the SMS

on both the bid and offer side are discarded, so that only VWAMPs from reasonably-sized trades are included

in the calculation.

Crossed order books

Crossed order books, in which the bid price is higher than the offer price, could exist momentarily but would

not be truly representative of the market during the data collection window. Snapshots with crossed order

books are therefore discarded.

Zero spread order books

Similarly, an order book may have a best bid and best offer which are equal to each other. The calculation

excludes these snapshots.

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 5

Minimum number of snapshots

IBA also sets a minimum number of liquid snapshots which must be available in order to perform the

calculation.

6. Outlier checks are made to protect against momentary and unrepresentative spikes in price. The snapshots

that passed the previous checks are ranked in order of their VWAMPs. The snapshots higher than the 75th

percentile and lower than the 25th percentile are discarded, leaving only the most representative snapshots.

7. IBA combines the remaining VWAMPs into a final price using a quality weighting. Snapshots with tighter

spreads between the Volume Weighted Bid and Offer are indicative of a better quality market so are given a

higher weighting.

When there are not enough liquid snapshots to calculate the rate for a tenor, the day-on-day move in adjacent tenors

and the previous day's rate for the tenor are used to interpolate a rate, provided that the following conditions are met:

• The adjacent tenors are spaced one year either side of the missing (‘target’) tenor;

• Neither adjacent tenor is itself interpolated; and

• The previous day’s publications of the target tenor and the adjacent tenors were not interpolated.

If the above conditions for applying movement interpolation are not met, IBA publishes a ‘No Publication’ for that

tenor. All tenors with sufficient volume are published in the normal way.

Regulation of IBA and ISR IBA is authorised and regulated by the Financial Conduct Authority (FCA) for the regulated activity of administering

a benchmark, and is authorised as a benchmark administrator under the EU Benchmarks Regulation (BMR).

The general requirements in Title II of the BMR apply to ISR. These include requirements in respect of a benchmark’s

input data and methodology; governance and management of conflict of interest requirements; benchmark oversight;

maintenance of Control and Accountability Frameworks; record-keeping; and reporting of infringements.

The regulatory technical standards for the procedures and characteristics of the oversight function of certain

benchmarks also apply to ISR.

The ICE Swap Rate Oversight Committee is comprised of an independent Chairperson and market representatives.

The Oversight Committee is responsible for monitoring the administration of the benchmark. The composition and

terms of reference of the Committee are published here.

Further Information Further information about ISR, including how to access the benchmark rates, can be found here.

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 6

ISR GBP SONIA rates

Introduction The movement away from GBP LIBOR to SONIA is expected to lead over time to diminishing volume in the existing

ISR GBP benchmark as the transition progresses and demand for SONIA-based swaps increases.

IBA is looking to introduce a new suite of ISR tenors which will have SONIA as the floating leg. This will be done

alongside the existing GBP LIBOR-based benchmark for as long as necessary and/or possible. IBA intends to use

the same methodology, processes and governance as for the existing benchmark.

Further to IBA’s Feedback Request paper in August 2019, IBA is now seeking formal feedback on aspects of the

introduction of ISR GBP SONIA rates.

Tenors The tenors in which ISR GBP Rates 1100 is currently published are as follows: 1 year (1Y); 2Y; 3Y; 4Y; 5Y; 6Y; 7Y;

8Y; 9Y;10Y; 12Y; 15Y; 20Y; 25Y and 30Y.

Q1 Do you agree that IBA should publish ISR GBP SONIA in the same tenors as ISR GBP Rates 1100? Yes/No

Q2 If your answer is No to Q1, please circle the tenors that IBA should in your view publish for ISR GBP SONIA:

1Y; 2Y; 3Y; 4Y; 5Y; 6Y; 7Y; 8Y; 9Y;10Y; 12Y; 15Y; 20Y; 25Y; 30Y.

Q3 Please add any comment you may have about your response to Q2.

Q4 Do you consider that IBA should publish other tenors as well? Yes/No

Q5 If your answer is Yes to Q4, please circle and/or add the additional tenors that IBA should in your view publish

for ISR GBP SONIA: 18M; 40Y; 50Y; others (please specify).

Q6 Please add any comment you may have about your response to Q5.

Day counts and interest rate basis The day counts and interest rate basis for the underlying interest rate swaps for ISR are published here.

The day counts and interest rate basis for the underlying interest rate swaps for ISR GBP Rates 1100 are as follows:

1Y tenor Tenors over 1Y

Day-count Interest rate basis

(M= month)

Day-count Interest rate basis

(M= month)

Actual/365 3M LIBOR Semi-annual actual/365 6M LIBOR

For ISR GBP SONIA, IBA proposes the following:

1Y tenor Tenors over 1Y

Day-count Interest rate basis

(M= month)

Day-count Interest rate basis

(M= month)

Actual/365 O/N SONIA compounded

for 12M (Annual/Annual)

Actual/365 O/N SONIA compounded

for 12M (Annual/Annual)

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 7

Q7 Do you agree that the day counts and interest rate basis for the underlying interest rate swaps for ISR GBP

SONIA should be as above? Yes/No

Q8 Please explain the rationale for your answer to Q7.

Q9 If your answer is No to Q7, what would you propose?

Methodology IBA is developing a ‘waterfall’ approach for ISR GBP LIBOR under which, in times of low liquidity on CLOBs, additional data sources would be incorporated on a tenor by tenor basis.

Accordingly, the ISR LIBOR methodology and calculation will be used whenever the underlying market liquidity is

sufficient. When CLOB data is insufficient, IBA is proposing to use Dealer to Client data from dealer platforms and

other RFQ data as a supplement. IBA is currently consulting on the best way to do this.

Q10 Do you agree that the same waterfall approach should be used for ISR GBP SONIA as for ISR GBP LIBOR in

times of low liquidity underlying ISR GBP SONIA? Yes/No

Q11 If your answer is No to Q10, please explain the rationale for your answer.

Implementation Market participants, and in particular SONIA Swap Traders and CLOB Platforms, have commented to IBA that time may be needed in order to implement and build infrastructure if SONIA is supplied through CLOBs.

Q12 Please suggest when IBA should introduce ISR GBP SONIA: Earliest introduction (e.g. Q2 2020); Latest

introduction.

Q13 Please explain the rationale for your answer to Q12.

Publication time The vast majority of those responding to IBA’s Feedback Request in August 2019 were supportive of publishing a rate at 11:15 London time based on a collection window from 10:58 to 11:00, which is the same as for the existing ISR GBP. Two respondents suggested publication to coincide with GBP ISR/OIS publication times. Q14 Do you agree that ISR GBP SONIA should be based on a collection window from 10:58 to 11:00 London time?

Yes/No

Q15 If your answer is No to Q14, what publication time or times would you prefer?

Q16 If your answer is No to Q14, please explain the rationale for your answer to Q15.

Publication days IBA proposes that the GBP SONIA-based benchmark should be published on all London business days and not on

bank holidays in England and Wales (see https://www.gov.uk/bank-holidays)

Q17 Do you agree that ISR GBP SONIA should be published on all London business days? Yes/No

Q18 If your answer is No to Q17, what publication days would you prefer?

Q19 If your answer is No to Q17, please explain the rationale for your answer to Q18.

General Feedback IBA also welcomes more general feedback on ISR: Q20 Do you have any additional comments about ISR? Yes/No

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 8

Q21 If your answer is Yes to Q20, please add your additional comments.

Publication of Completed Questionnaires IBA will publish completed questionnaire unless confidentiality is requested in response to Q22 (by circling No or

deleting Yes).

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 9

Disclaimers

IBA reserves all rights in the copyright in this document and on IBA’s website. None of these rights may be used

without a written license from IBA. Market participants and other stakeholders may make a reasonable number of

copies of this document for the sole purpose of providing feedback to IBA.

The approach set out in this document is subject to change in response to feedback from market participants and

other stakeholders and IBA's further development work.

None of IBA, Intercontinental Exchange, Inc. (ICE), or any of its or their affiliates accepts any responsibility or will be

liable in contract or tort (including negligence), for breach of statutory duty or nuisance or under antitrust laws or

otherwise for the information contained in this document or on IBA’s website or any use that you may make of it. All

implied terms, conditions and warranties and liabilities in relation to the information are hereby excluded to the fullest

extent permitted by law. None of IBA, ICE or any of its or their affiliates excludes or limits liability for fraud or fraudulent

misrepresentation or death or personal injury caused by negligence.

SONIA is published by the Bank of England and is used subject to its terms of use. The Bank of England has no

liability for your use of this document or any data on IBA’s website.

EURIBOR® is a registered trademark of the European Money Markets Institute (EMMI).

General IBA is authorised and regulated by the Financial Conduct Authority. ICE, LIBOR, ICE LIBOR, ICE Swap Rate and

ICE Benchmark Administration are trademarks of ICE and/or its affiliates. All rights in these trademarks are reserved

and none of these rights may be used without a written license from ICE and/or its affiliates, as applicable.

Intercontinental Exchange (NYSE: ICE) is a Fortune 500 company formed in the year 2000 to modernise markets.

ICE serves customers by operating the exchanges, clearing houses and information services they rely upon to invest,

trade and manage risk across global financial and commodity markets. A leader in market data, ICE Data Services

serves the information and connectivity needs across virtually all asset classes. As the parent company of the New

York Stock Exchange, the company is the premier venue for raising capital in the world, driving economic growth and

transforming markets.

Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New

York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental

Exchange, Inc. and/or its affiliates is located at:

http://www.intercontinentalexchange.com/terms-of-use.

Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based

Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key

Information Documents (KIDS).”

Safe Harbour Statement under the Private Securities Litigation Reform Act of 1995 -- Statements in this press release

regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and

uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from

those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings,

including, but not limited to, the risk factors in ICE's Annual Report on Form 10-K for the year ended December 31,

2018, as filed with the SEC on February 7, 2019.

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 10

ICE Swap Rate consultation questionnaire - SONIA rates

IBA seeks stakeholder feedback on the proposed expansion of data used in the ISR calculation. Respondents are

requested to provide feedback to IBA at IBA@theice.com by 5pm London time on Friday May 22, 2020.

Please attach additional pages if required for your responses.

This questionnaire requests specific feedback from market participants but more general feedback by email or letter

is also welcome.

Contact Information

Name

Position

Organisation

(if any)

Telephone

Email

For Qs with optionality, please circle your answer or delete the answer that does not apply.

Q1 Do you agree that IBA should publish ISR GBP

SONIA in the same tenors as ISR GBP Rates

1100?

Yes/No

Q2 If your answer is No to Q1, please circle the

tenors that IBA should in your view publish for

ISR GBP SONIA.

1Y; 2Y; 3Y; 4Y; 5Y; 6Y; 7Y; 8Y; 9Y;10Y; 12Y; 15Y;

20Y; 25Y; 30Y

Q3 Please add any comment you may have about

your response to Q2.

Q4 Do you consider that IBA should publish other

tenors as well?

Yes/No

Q5 If your answer is Yes to Q4, please circle and/or

add the additional tenors that IBA should in

your view publish for ISR GBP SONIA.

18M; 40Y; 50Y

Others (please specify):

Q6 Please add any comment you may have about

your response to Q5.

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 11

Q7 Do you agree that the day counts and interest

rate basis for the underlying interest rate swaps

for ISR GBP SONIA should be as above?

Yes/No

Q8 Please explain the rationale for your answer to

Q7.

Q9 If your answer is No to Q7, what would you

propose?

Q10 Do you agree that the same waterfall approach

should be used for ISR GBP SONIA as for ISR

GBP LIBOR in times of low liquidity underlying

ISR GBP SONIA?

Yes/No

Q11 If your answer is No to Q10, please explain the

rationale for your answer.

Q12 Please suggest when IBA should introduce ISR

GBP SONIA:

Earliest introduction (e.g. Q2 2020):

Latest introduction:

Q13 Please explain the rationale for your answer to

Q12.

Q14 Do you agree that ISR GBP SONIA should be

based on a collection window from 10:58 to

11:00 London time?

Yes/No

Q15 If your answer is No to Q14, what publication

time or times would you prefer?

Q16 If your answer is No to Q14, please explain the

rationale for your answer to Q15.

Q17 Do you agree that ISR GBP SONIA should be

published on all London business days?

Yes/No

Q18 If your answer is No to Q17, what publication

days would you prefer?

© Copyright 2020 ICE Benchmark Administration Limited ICE Swap Rate Consultation - SONIA rates 12

Q19 If your answer is No to Q17, please explain the

rationale for your answer to Q18.

Q20 Do you have any additional comments about

ISR?

Yes/No

Q21 If your answer is Yes to Q20, please add your

additional comments.

Publication of this completed questionnaire IBA will publish your completed questionnaire unless you circle No or delete Yes in the box below to request

confidentiality.

Q22 Do you agree to this completed questionnaire

being published by IBA?

Yes / No

Please email your completed questionnaire to IBA@theice.com by 5pm London time on Friday May 22, 2020.

Or post it, to arrive by 5pm London time on Friday May 22, 2020, to:

ICE Benchmark Administration Limited Milton Gate 60 Chiswell Street London EC1Y 4SA